CurrentCommentary
The Bear'sLair: Jobs in the bear market still uncertain
WASHINGTON, (UPI) -- Even in the outbreakof pessimism about the economy last week, few have touched onthe effect of a prolonged bear market recession on employmentpatterns. Since this is a matter of huge importance to most ofus, particularly young people entering the workforce and seekinga career path, I thought it worthwhile, starting from an appropriatelybearish viewpoint, to examine the economy's tea leaves and seewhat patterns result.
A recession and a bear stock market involvehigher unemployment, of course, but they do not necessarily involvethe kind of devastation seen in the United States in the 1930s.In Britain, for example, the lengthy period of under-employmentin the 1920s and 1930s was heavily concentrated in declining industriesand geographical areas, and some sectors, including notably housingand motor vehicle production, provided excellent employment opportunitiesmore or less throughout the inter-war period.
In Japan, too, the decline in output since1990 has resulted in an increase in unemployment, but the increasehas been by no means uniform, with particular concentrations inthe sectors such as real estate and banking that are especiallyuncompetitive internationally, while other sectors, dependenton exports and the world market, have held up relatively well.Here, however, the high value of the yen since 1990 has playedan inhibiting role; it is of little value for a Japanese workerat Sony or Toshiba to know that their company is doing well, ifat the same time much of its production is being outsourced toChina and elsewhere.
In the United States, the combination ofthe huge influx of resources into certain technology and financialsectors, and demographic trends, can give some pointers as tofuture job opportunities. It is likely, for example, that thereare currently more fully qualified and trained telecoms engineersthan can find jobs over the next few years!
Demographics first. The U.S. populationof 35-54 year olds, the peak consumers and acquirers of real estate,will peak in 2002 (absent massive immigration in that age bracket,which is unlikely --- most immigrants are younger) and begin todecline thereafter. The first baby boomers will reach retirementage in 2006-10, and the number of senior citizens, and their percentageof the U.S. population, will then increase for a couple of decades.This doesn't mean that nursing home managers are due for a hugeboom --- we're still two decades away from that. However it islikely that retirement-friendly areas, such as Arizona and centralFlorida, will see demographic growth at the expense of big citysuburbs with high real estate prices, and that outpatient medicalcare, for example, will continue to grow as the aging populationdiscovers that it can no longer afford to ignore its health.
Another corollary of this demographic trendis a relative decline in the retail sector, already visible butdue to extend much further.
In particular, the upscale retail sector,both in department stores and of luxury goods will be adverselyaffected by demographics, by the impending exhaustion of the Americanconsumer's borrowing capacity, by the decline in stock portfolios,and by the elimination of the huge stock option grants that wereseen in the late '90s. In terms of consumption, this last trendis likely to be very important, and affect not only the top executiveswho hit the headlines but, more important in terms of overallvolume, middle management, who will find their stock option grantsvery much smaller than in the past, and option exercise less immediatelyprofitable. There are a number of trades which will be very severelyaffected by this; interior decorators, luxury car salesmen, andupscale retail sales clerks are all going to find it much moredifficult to make an honest buck.
In real estate, I expect the continuingboom of the last two years to fade gradually, with prices declininggenerally and properties being hard to sell. Mortgage financeis likely to remain both cheap and readily available, so the biggestdeclines in real estate prices will be seen in areas where thefall in employment is greatest, such as New York and San Francisco.Conversely, areas such as Washington and Los Angeles, which maysee growth in employment (for different reasons) will also seesteadier real estate markets, although suburban Virginia, in particular,is heavily overbuilt and will continue to suffer from the techdebacle.
More affected than homeowners will be thosetrades which depend on a healthy flow of transactions, such asrealtors and home building companies, especially those concentratingon the upper end of the market.
At the same time, assuming immigration continuesat a fairly high level, and the economy remains healthy enoughto assimilate immigrants, the middle and lower levels of the housingmarket should be fairly healthy, with only modest price declinesand continuing first time buyer demand from the youthful immigrantpopulation as they build equity and settle into middle-aged familycreation.
Employment in the federal government willprobably continue to increase, because there are no firm budgetconstraints at the federal level, and politicians will be temptedto engage in contra-cyclical Keynesian deficit spending (thiswon't work, but they'll try it anyway.) Further, the politicalcycle seems likely to swing leftwards in the next couple of years,always good news for the bureaucrat class. Expect growth in anythingthat can be plausibly related to "homeland security,"and a surge in environmental and diversity enforcement employmentif the leftward political swing takes place. Conversely, stategovernment spending, which ballooned in the late '90s, will besharply constrained by budget deficits and voter opposition toa resumption of tax increases in difficult times.
Much of the investment in the Internet,and in the telecom sector, has clearly been wasted, and much ofthe very high quality talent lured into these sectors in the late1990s will find employment opportunities very limited, particularlycompared to what they expected. However, the existence of a highquality high speed cable network, and the beginnings of a 3G,or third generation, mobile telephone network, is likely to lurecompanies into trying to attract consumers to use these expensivefixed assets in order to begin to amortize their costs. Thereshould thus be a continued boom for media content, not so muchprint content, which can already be carried on existing networks,and the capacity to produce which has already been ramped up,but graphic content -- TV-style programming of various types.
While money will flow to the owners of highquality existing content, such as film libraries, there shouldbe continued strong demand for new material to feed the ever-expandingdigital distribution channels. Most of the new content demandedwill of course be fairly low quality -- not much opera or Shakespeare-- but you can expect to see the producers of cleverly marketednon-traditional sports content, fashion and music features, gameshows, soft core pornography, and no doubt currently unimaginablefeatures combining elements of all these to continue to thrive.Major league sports, on the other hand, being finite in quantityand burdened by an excessive cost base, are likely to find itdifficult to compete in the new world of multi-faceted contentdistribution.
Finance is likely to have a grim coupleof decades. On the positive side, there will be increased demandfor annuity products of one sort or another, probably combinedwith medical insurance, as the baby boomers start to retire. Onthe other hand, the flow of funds into baby boomers' retirementaccounts will slow and then reverse, their credit card debt, swollenby spending patterns developed in the late-'90s, will spiral intohigh loss levels and little growth, and stock market trading volumesand prices will shrivel -- the likely explosion in governmentdebt will not make up for this, as government debt carries muchlower commissions than stocks.
Further, the advent of the Internet hasmade traditional retail brokerage a service that is, in comparisonwith its electronic competitor, impossibly expensive and inefficient.Expect employment in both commercial and investment banking todrop to a much lower level, and not to resume its growth for decades.
Finally, there are a number of areas thatdepend on political decisions. The Bush administration appearspulled between the political joys of protectionism and the economicbenefits of free trade; if protectionism wins then world trade(and services relating thereto) will suffer. In that case therecession will be much worse and longer lasting but there mightbe jobs available in sectors such as steel, textiles, lumber andagriculture (automobiles, garment retailing, homebuilding andfood processing will suffer, on the other hand.)
Again, since healthcare spending dependson adequate funding; a move towards a British-style "NationalHealth Service," for example after a leftward political swing,will increase job possibilities in public sector healthcare administration,but reduce those in the pharmaceutical sector, and biotech generally.Regulation (for example, of cloning technology), nationalizationand price controls may drive a substantial portion of the healthcaresector offshore, to the detriment of U.S. job opportunities.
The future pattern of U.S. employment ishighly uncertain. However, job seekers animated by this column'sBear perspective can discern some trends, and thereby make decisionsthat steer them towards an attractive sector or at least avoidcareer suicide.